While estimating national income by the expenditure method, which of the following items is included in government final consumption expenditure?
Answer and explanation
Correct answer: Salaries paid to government employees
Salaries paid to government employees are compensation for current labour services used to produce public administration, education, health, security, and other government services. They are therefore included in government final consumption expenditure. Buying shares or old bonds is a financial transaction and does not represent current production. An old-age pension is a transfer payment, not payment for a currently produced good or service, so it is also excluded from final expenditure.
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What is the correct answer to this question?
Salaries paid to government employees
Why is this the correct answer?
Salaries paid to government employees are compensation for current labour services used to produce public administration, education, health, security, and other government services. They are therefore included in government final consumption expenditure. Buying shares or old bonds is a financial transaction and does not represent current production. An old-age pension is a transfer payment, not payment for a currently produced good or service, so it is also excluded from final expenditure.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Expenditure Method.
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